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UMass Memorial Health Care in Worcester has had its credit rating affirmed by S&P Global Ratings, a decision the New York City agency said reflects strong budget earnings and public financial support despite the major hit the hospital system has taken during the coronavirus pandemic.
S&P affirmed UMass Memorial's rating at BBB+. The stronger an institution's credit rating, the cheaper it can borrow funds at lower interest rates.
UMass Memorial had strong budget earnings leading into the pandemic, modest debt leverage and an increased balance sheet from the August 2019 sale of a pharmacy benefit management company that brought in $208 million, S&P said in a report Friday. The rating also reflects the Worcester-based hospital network's continued financial support from the state's Medicaid supplemental funding program.
UMass Memorial Medical Center President Michael Gustafson said in May the hospital system has a roughly $75-million budget deficit, including a loss of $25 million in March when the hospital began shifting its focus of care to coronavirus cases and $40 million to $45 million in April when cases peaked.
Gustafson said the deficit is in part due to redeploying hundreds of workers from areas such as ambulatory clinics to drive-up testing tents or assisting intensive care providers.
"This will be by far the worst financial year in the history of the system," Gustafson said in a Worcester Business Journal online forum with local healthcare leaders, discussing the front line impact of the pandemic.
UMass Memorial Health Care President and CEO Dr. Eric Dickson has committed to avoiding layoffs and furloughs across the UMass Memorial system, which employs roughly 13,000 people, the most in Central Massachusetts.
S&P said it believes the pandemic will pressure UMass Memorial's budget but that it has the capacity to absorb some strain on its finances.
The hospital system had a $41-million operating deficit in the six months ending in March on operating revenue of more than $1.3 billion, according to the agency. Long-term debt is $529 million, a slightly lower debt burden than most health care systems with a BBB+ rating.
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Worcester Business Journal presents a special commemorative edition celebrating the 300th anniversary of the city of Worcester. This landmark publication covers the city and region’s rich history of growth and innovation.
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